Sundaram ELSS Tax Saver Fund for Better Returns Invest Now

The Sundaram ELSS tax saver fund is an equity-oriented mutual fund scheme which is meant for investors who are keen to create wealth in the long run and at the same time, avail the tax benefit.

The Sundaram ELSS tax saver fund regular growth option might appeal to investors who prefer to invest through a distributor and do not wish to redeem the investment gains.

What Is Sundaram ELSS Tax Saver Fund?

Sundaram ELSS Tax Saver Fund is a scheme of the company which is an open-ended equity and equity related security investment scheme. It has the objective of creating a quality portfolio oriented towards growth, capable of creating capital appreciation over time.

Understanding Equity-Linked Savings Schemes (ELSS)

ELSS funds are mutual fund schemes which invest primarily in equity and under certain provisions of the Income Tax Act are eligible for tax deduction.

How Does an ELSS Mutual Fund Work?

An ELSS fund pools funds from several investors and buys a variety of equity and equity-related securities.

Professional fund managers study companies, assess their financial performance and choose to invest in the company according to the objectives and strategy of the scheme.

The portfolio’s value fluctuates with the stock market. The NAV (Net Asset Value) of the scheme is affected by such movements.

Well-performing portfolios over a period of time could lead to capital appreciation from the investment. But prices of stocks can also go down which can likewise lessen the investment worth.

Thus, investors must consider ELSS investments as stock investments instead of tax-deductible investments.

Understanding Sundaram ELSS Tax Saver Fund Regular Growth

The Sundaram ELSS tax saver fund regular growth option has two important features – Regular investment plan and Growth investment option.

What Is the Regular Plan?

A Regular Plan is a plan that will enable investors to make investments via registered mutual fund distributors, financial advisers or other authorized intermediaries.

How Does the Growth Option Work?

The Growth Option has no periodic “IDCW” payouts for investors.

Rather, the profits generated from the scheme are retained in the scheme and not dispersed to the shareholders. Such gains will be included in the overall portfolio value and will be presented in the NAV.

The scheme doesn’t make regular payments to you. The value of your investment will fluctuate with the movement of the fund’s NAV.

This may be right for investors who prefer to build up their investment over time, not receive periodic distributions.

Note that the Growth Option does not assure capital appreciation.

Regular Plan vs Direct Plan

Both plans invest in the same underlying schema portfolio and both have the same investment objective. The main distinction is with their distribution configurations and expense ratios.

Tax Benefits of Investing in Sundaram ELSS Tax Saver Fund

The Sundaram ELSS tax saver fund offers tax saving benefits based on the old tax regime provisions.

Section 80C Tax Deduction

In the previous tax regime, investments made in ELSS can be claimed as deduction under Section 80C, up to a limit of ₹1.5 lakh for an entire year.

This can be deducted under Section 80C, subject to certain eligibility requirements, and once this amount has been taken off the overall limit for the other investments.

Keep in mind that the limit of ₹1.5 lakh is for multiple investments and expenses. It is not a special allowance for ELSS.

Understanding the Old and New Tax Regimes

When investing in ELSS for tax saving purposes, the choice of tax regime is of great importance.

Old tax regime: There are deductions available under the old tax regime in Section 80C, subject to the prescribed limit and conditions, for investments eligible under ELSS.

New tax regime: Section 80C deduction is not eligible in most cases.

If you choose the new tax regime, then you shouldn’t invest in ELSS for the claim of Section 80C.

However, if you align the fund with your financial objectives and risk comfort, you may still wish to consider the fund for equity investments.

When investing, it’s important to understand the tax differences between the two systems and seek the advice of a tax lawyer if needed.

Taxation of Capital Gains

However, the equity oriented mutual funds capital gains tax rate will apply to ELSS investment on redemption of the units.

The current tax system provides for the following broad treatment of the transaction:

• STCG on eligible equity oriented mutual fund units, which are redeemed within 12 months, is taxed under the provisions of the income tax at 20% with indexation benefit.
• Long-term capital gains from eligible units with a holding period of over 12 months, generally, are taxed at 12.5% on the aggregate eligible gains over ₹1.25 lakh per financial year after applying relevant conditions.

There may also be an applicable surcharge and a corresponding cess.

The three year lock-in period indicates that the investors are mostly investing in the allotted investment for more than 12 months prior to redemption. So, long-term capital gains are likely to be the normal category for eligible redemption gains.

Tax laws are subject to change, so consult the relevant laws before redeeming your investment.

Conclusion

The Sundaram ELSS tax saver fund is a fund that is available to investors to participate in the equity market and at the same time take advantage of benefits that are tax saving for the old tax regime.

It can be a good option for those investors who want to receive the tax benefits and are willing to take the help of the distributor and prefer to invest in the Sundaram ELSS tax saver fund regular growth and do not want to receive the returns in the form of distributions.

FAQs

1. Is Sundaram ELSS Tax Saver Fund suitable for beginners?

Ans) Sundaram ELSS Tax Saver Fund could be ideal for the investor who is aware of equity market risk and is looking at investing in tax saving mutual funds. With its Very High Risk classification, however, new investors should think about their risk tolerance and financial objectives prior to investing.

2. What is the lock-in period of Sundaram ELSS Tax Saver Fund?

Ans)The scheme imposes a three-year lock-in period on all unit allotments, starting from the date it allots the units to investors. Investors cannot redeem their units until the lock-in period ends. Every SIP installment comes with a different three-year lock-in.

3. Can I invest through SIP in Sundaram ELSS Tax Saver Fund?

Ans)Yes. It has a Systematic Investment Plan facility in the scheme. Investors can choose a regular SIP amount subject to the applicable minimum SIP amount and can invest in regular intervals. Keep in mind that each SIP installment comes with a three year lock-in period.

4. Does Sundaram ELSS Tax Saver Fund offer tax benefits under Section 80C?

Ans)Under the old tax regime, investors can claim a deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act for eligible investments in the scheme, subject to certain conditions. The new tax regime generally does not allow this deduction.

5. What is the difference between Sundaram ELSS Tax Saver Fund Regular Growth and Direct Growth?

Ans)Both options invest in the same underlying scheme portfolio with the same objective of the investments. The Regular Plan costs the distributor fees and will typically be more expensive. The Direct Plan excludes distributor commissions and generally has a lower expense ratio. Under both Growth Options, the scheme retains investment income instead of distributing it to investors at regular intervals.